The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Transcript of 23/03/2005

Interview with Tracey Grimshaw
Today Show

Wednesday, 23 March 2005
7.10 am

 

SUBJECTS: GST, Intergovernmental Agreement, Income Tax

GRIMSHAW:

Treasurer good morning.

TREASURER:

Good morning Tracey.

GRIMSHAW:

It sounds like the State Treasurers are going to be quite literally revolting today.

TREASURER:

Well we have put forward a plan which can cut taxes by $8.5 billion over four years and still leave the States better off than they would have been under the old taxation system. That is because the GST is growing and as the GST grows and delivers increasing amounts to the State Governments we say some of that should be shared with the taxpayers. About half of it should be used to cut taxes and the other half of it can be kept by the State Governments.

GRIMSHAW:

You say they are going to be better off, they say quite the opposite.

TREASURER:

Well all of the figures which I have released and which will be discussed today show that every state will be better off and in the case of New South Wales just to make sure that there was no doubt we have offered them another $330 million which if they agree to cut taxes for the people of New South Wales they will actually get an additional sum if they agree today.

GRIMSHAW:

Victorian Treasurer John Brumby, says that it is time for federal tax cuts, he says the average Victorian for example pays $2,000 a year in state taxes and $9,000 in federal taxes.

TREASURER:

Well what we are doing here is we are discussing the GST which is the state taxes and how it should be used. The Commonwealth of course administers its own tax system, that is separate, that is administered by the Commonwealth. The States administer their own tax system. They have things like stamp duties and land taxes which I am sure you will have realised have gone up a lot but today’s discussion is not about the state tax, not about the Commonwealth tax it is about what should be done under the Intergovernmental Agreement with the GST.

GRIMSHAW:

Can you see much room for common ground today? I mean it does not appear that the State Treasurers are in any mood to negotiate.

TREASURER:

Well I would say this, what a great outcome if we can cut taxes by $8.5 billion, if the State Governments are still in front. They see that sometimes as a negative, I see it as enormously positive. I am in the business of cutting these taxes and I think if they thought about it they would be too because it would help businesses and it would help consumers in their own states. If you cut the taxes of the businesses and the businesses are going to be able to employ more people, they are going to be able to give reduced prices onto consumers, you don’t want to see the reduction of these indirect taxes as something to be feared, it is something to be actually welcomed and when we introduced this agreement in 1999 and I negotiated it with all of the States, the States back then actually wanted to get rid of these taxes and that is one reason why the GST was brought in.

GRIMSHAW:

Alright, can we broaden our discussion this morning beyond today’s meeting, the push for tax cuts is quite universal and I think that was probably demonstrated by the enthusiastically actioned Malcolm Turnbull’s proposals recently, would you not agree?

TREASURER:

Well I think it is important to cut taxes and today we can cut taxes by $8.5 billion. If we get an agreement today you will get an $8.5 billion tax cut. That is the most positive, concrete proposal which is on the table and it can be done by the end of today. If we can’t do that by the end of today we won’t have made any progress.

GRIMSHAW:

Let’s not talk about state taxes at the moment let’s talk about income taxes, we for example had hundreds of viewer responses calling for tax cuts, calling for example, I guess the key points that our viewers were calling for were a flat rate of tax for income splitting as key issues. Everyone of those people who wrote to us is a voter.

TREASURER:

Sure, and let me say that for most people that income splitting would not be as good as the current tax system because if you are a family with two kids you don’t actually pay tax once you take into account Family Tax Benefits until about $40,000 in Australia. So income splitting would advantage people higher up the income scale but it would disadvantage people who are poorer and I think it is the responsibility of the Government to look after the poorer people as well as the higher income earners.

GRIMSHAW:

So Malcolm Turnbull’s proposals to lower the highest marginal income tax rate doesn’t find any fertile ground with you at all?

TREASURER:

Well Malcolm had a proposal to increase tax on high income earners you recall and he said that that could be done by changing tax to make high income earners pay more. I don’t know that is possible because we looked very carefully at all of the schemes that are used by high income earners, we have wiped nearly all of them out, I am not aware of any that can still be used. We have wiped out things like infrastructure bonds, we have wiped out things like trafficking in trust losses, I am not precisely sure that there are any left but if anyone wants to show me an example we would be very happy to move on it.

GRIMSHAW:

The Budget is on May the 10th, the Prime Minister says that he will look at tax cuts if there is a strong surplus, I guess you have an idea at this point whether there is going to be one?

TREASURER:

Yes there will be a tax cut on 1 July, we will be cutting taxes as we announced in last years Budget. So from 1 July those tax cuts that we announced in last years Budget will come into effect and people will be able to take advantage of them.

GRIMSHAW:

But there have been interest rate rises since what you announced last year and people are feeling the squeeze, they would be looking for some sort of relief, can you understand that?

TREASURER:

Oh sure that is why we will be cutting taxes on 1 July, there will be a tax cut on 1 July, we have already announced that, it is yet to take effect but it is actually legislated and it will be coming into effect and that is why when we announced it we announced not only a tax cut on 1 July but you will recall we also announced an increase in family benefits for people with children, dependent children at $600 a year and that is now being paid $600 per child, per annum. If you have got three children, three dependent children that is an additional $1800 per annum which has given families a great improvement in their financial position.

GRIMSHAW:

OK, we have to wrap it up but I think you are saying no further tax cuts that you have planned to be announced in the Budget.

TREASURER:

Oh no, I am saying there will be a tax cut on 1 July that will be…

GRIMSHAW:

No further?

TREASURER:

…well how many to you want? There will be…

GRIMSHAW:

A lot.

TREASURER:

…a tax cut on 1 July 2005 as has already been announced along with the increased Family Tax Benefits. There will be a tax cut.

GRIMSHAW:

OK, I am telling you our viewers want lots more than that but alright.

TREASURER:

Well look I am sure at the end of the day no one wants to pay tax and everyone wants free hospital care and free medical care and subsidised pharmaceuticals but at the end of the day, Tracey, if you want a hospital when you are sick and a pharmaceutical when you need to get better and if you want a road to get you to the hospital you have got to pay some tax.

GRIMSHAW:

Alright, thank you for your time this morning.